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Austria's cash-strapped state of Carinthia
edged closer to bankruptcy Thursday after creditors rejected its plea to
forgive some of the debts owed by stricken state lender Hypo Group Alpe Adria
(HGAA).

Carinthia had announced Wednesday it was willing to buy back 11 billion euros ($12 billion) of bonds issued by the now defunct lender at 75 percent of their face value.

The bid, valid until March 11, needs to be accepted by at least two-thirds of the creditors of "bad bank" Heta Asset Resolution, the HGAA's wind-down unit.

But a group of bondholders -- who say they control more than 5 billion euros' worth of debt -- declared Thursday they would refuse any reduction in their claims.

The creditors include Germany's Commerzbank and a Dexia unit, according to Bloomberg.

"Any offer that doesn't foresee a full repayment of the claims is questioning the principle of legally defined, gilt-edged investments," the group said in a statement.

"In any case, Carinthia is clearly able to pay," the statement read, adding that the state's "assets" largely exceeded the amount offered.

A rejection could potentially bankrupt Carinthia, a small state of 500,000 inhabitants already saddled with 4.8 billion euros of debt.